U.S. interest rate hikes hamper post-pandemic global economic recovery -- Cambodian academics

PHNOM PENH, Sept. 30 (Xinhua) -- The U.S. Federal Reserve's aggressive interest rate hikes have been hampering the global economic recovery in the post-COVID-19 pandemic era, Cambodian academics said.

Since March, the U.S. Federal Reserve has raised its interest rate by 300 basis points, and in its latest move by another 75 basis points for the third consecutive time to fight record inflation.

Ky Sereyvath, a senior economist at the Royal Academy of Cambodia, said the U.S. interest rate hikes are causing rising inflation and depreciating currencies of other countries around the world.

"The Fed's aggressive rate hikes have been leading to the depreciation of the currencies of other countries and the rise of global inflation," he told Xinhua.

Sereyvath said the rate hikes have also led to a significant decline in the price of gold and affected the consumption of other countries.

Joseph Matthews, a senior professor at the BELTEI International University in Phnom Penh, said the interest rate hikes have been slowing down global and regional economy by making borrowing more expensive.

"On the negative side, consumers, investors, and businesses pause on making investments and purchases with credit, which leads to reduced economic demand and theoretically brings down the scales of supply," he told Xinhua.

Matthews said pushing up rates too quickly may reduce consumer demand worldwide, which unduly stifles economic growth, leading businesses to lay off workers or stop hiring and resulting in surge in the unemployment rate globally.

Besides, the hikes can hurt the stock market globally, he said, adding that the cost of doing business will go high for both public and private companies around the world.

"It will also have a very negative impact on the Bonds Market as bonds are particularly sensitive to interest rate changes," he said. "When the Fed increases rates, the market prices of existing bonds immediately decline globally."

Moreover, the professor said most currencies around the globe have depreciated against the U.S. dollar, which makes their import of goods and services more expensive.